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Saturday, April 12, 2008

Subprime losses lower Mizuho profit forecast

Staff writer

Mizuho Financial Group Inc. on Friday revised downward its forecast for business 2007 to ¥310 billion in group net profit from its initial ¥480 billion due to losses stemming from the U.S. subprime loan crisis. It was the third downward revision for the business year.

Mizuho Financial Group, the nation's No. 2 banking group by assets, said losses from the subprime mortgage loan upheaval are expected to rise to ¥565 billion in the year that ended in March, up from the January forecast of ¥395 billion.

Pretax profit will plunge to ¥410 billion from its previous forecast of ¥630 billion, Mizuho said. The banking group, however, will still pay a dividend of ¥10,000 per share.

Most of the losses stemmed from Mizuho Securities Co., an investment banking unit of the financial group, which is planning to book ¥420 billion in net losses in the business year to March.

"Because prices of securities products are falling . . . losses are expanding," Mizuho said in a statement.

Shinichi Ina, a banking analyst at Credit Suisse Securities (Japan) Ltd., said Mizuho's downward revision was expected after Mizuho Securities shelved a merger deal with Shinko Securities.

Subprime-related losses prompted Mizuho in November to delay the acquisition, saying it needed to revise terms that valued Shinko at ¥765 billion.

"But the amount of revision was bigger than I expected," Ina said. "There will be a negative short-term effect."

But since Mizuho's exposure to securities products related to subprime loans in the U.S. is declining, it is unlikely to post large additional losses in the future, Ina said. Mizuho said its exposure to such securities products dropped to about ¥100 billion from ¥470 billion at the end of December.

Ina also said other banking groups and financial institutions are likely to make downward revisions later this month and next month before they officially announce their earnings reports for business 2007.

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The Japan Times

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